Weatherford Earnings: Raising Fair Value Estimate to $79 On Strong International Oil and Gas Activity

Weatherford International WFRD delivered strong third-quarter results, with total revenue increasing 17% year over year and 3% sequentially, while the firmwide adjusted EBITDA margin jumped more than 400 basis points year over year to 23%. The firm benefited from its high exposure to international and offshore oil and gas markets, realizing superior returns compared with peers with a heavier North American tilt. Continued growth is likely, with offshore and international activity on track for a double-digit increase in fiscal 2024, according to management.

We maintain our no-moat rating, but we’re raising Weatherford’s fair value estimate to $79 from $67, owing to the firm’s favorable long-run prospects and substantial internal operational improvements, which are ongoing. The firm is on track to expand full-year EBITDA margins by well over 300 basis points for the third year straight. Adjusted EBITDA margin has averaged 23% year to date, steadily approaching management’s long-run goal of mid-20s margins. Moving forward, Weatherford is implementing a comprehensive supply chain revamp that will update procurement, manufacturing, logistics, and aftermarket services in order to improve cost efficiency and optimize asset utilization. This, plus the firm’s steady transition to less-asset-intensive service offerings gives us confidence in Weatherford’s ability to continue performing at this level over the next five years.